“The investigative work of 2021 has all the makings of a made for TV movie – embezzlement of funds from a nonprofit, a family fraud ring that stole millions in COVID-relief funds and a $1 billion Ponzi scheme used to buy sports teams and luxury vehicles. But this is real life and I’m grateful to our IRS-CI agents for pursuing these leads and ensuring that the perpetrators were prosecuted for their crimes,” said IRS-CI Chief Jim Lee.

The top 10 IRS-CI cases of 2021, as decided by the IRS-CI, include: Continue Reading IRS-Criminal Investigations Counts Down the Top 10 Cases of 2021

All kinds of penalties are being assessed by the Internal Revenue Service (IRS) against taxpayers, and more can be expected in the future.  In 1954 there were 13 penalties in the Internal Revenue Code, and now there are more than 150. Taxpayers should not overlook the opportunity to request the IRS to abate penalties.  The IRS abates many penalties for reasonable cause. Continue Reading Asking the IRS to Abate Penalties

3D illustration of a rubber stamp with the word compromise printed on a brown paper with the text party one and twoOnce the IRS makes an assessment against a taxpayer, the taxpayer will receive several notices before the IRS takes enforced collection action.

Notice of Intent to Levy

This is the notice that is required before the IRS can levy and seize a taxpayer’s assets.

Some form of response should be sent with respect to these notices.  The response, along with a copy of the notice, should be sent by certified mail, return receipt requested, using the envelope provided by the IRS. The purpose in sending a response is so that it will show that the taxpayer is concerned about the taxes and is not ignoring them. Continue Reading Negotiating with the IRS Collection Division

Football penalty flagThe IRS is vigorously litigating cases involving conservation easements they believe are abusive.  One such case was Plateau Holdings, LLC v. Comm’r, T.C. Memo 2020-93 (Plateau I). In that case the Tax Court denied the entire deduction claimed based on a determination that the $25,449,000 value claimed was actually $2,691,200. A 40 percent penalty applied to the overvaluation amount (i.e. $22,757,800). In a subsequent action, Plateau Holdings, LLC v. Comm’r, T.C. Memo 2021-133 (Plateau II), the IRS also sought a 20 percent penalty for negligence on the lower valuation amount denied because the easement deed failed to protect the conservation purpose in perpetuity.  However, the taxpayer wasn’t required to pay the 20 percent penalty because the Tax Court concluded they were entitled to a defense against that penalty for acting with reasonable cause and in good faith. Continue Reading Recent Tax Court Case Outlines Factors Taxpayers can use to Avoid Negligence Penalties

Vintage composition of handwriting, quill pen and ink. Selective focus on ink and pen. Text is from Shakespeare's Sonnet 18. (Vintage composition of handwriting, quill pen and ink. Selective focus on ink and pen. Text is from Shakespeare's Sonnet 18.,In Shakespeare, an English King blames the loss of an important battle on his lack of a horse:  “A horse, a horse, my kingdom for a horse!”[1]

In real life (and especially, it seems, in tax law) it is more like to be the lack of a timely piece of paper that causes the taxpayer to lose.

In the course of administering a trust, it sometimes happens that mistakes are made that require correction.  For example, distributions may be made that are not in accordance with the provisions of a trust: payments to the wrong beneficiaries, or in the wrong amounts or for the wrong purposes.  A similar situation may arise when a trust instrument requires the trustee not to make any disposition of certain “legacy” assets, and the trustee erroneously sells them anyhow.

In such situations, the way to “undo” the transactions is for the parties to reverse the erroneous transaction by returning the distributions made in error.  When the year of distribution is a closed tax year and the act of correction is made in a later year, it is important to make sure that the distribution that is returned is treated as a tax-deductible expense, thus offsetting the taxable receipt of the erroneous distribution in the prior tax year. Continue Reading A Horse, a Horse, My Kingdom for a Horse! Lack of Proper Documentation Dooms IRS Disputes

Concept of decision or choice using a wooden boardwalk in dense forest in Great Dismal SwampOn November 30, 2021, the Fifth Circuit parted ways with the taxpayer friendly decision of the Ninth Circuit that non-willful penalties are capped at $10,000 per FBAR filing instead of the $10,000 per unreported bank account argued by the government. District courts in New Jersey, Connecticut, and Texas had all ruled in the taxpayer’s favor that non-willful penalties were capped at $10,000 per form.  In United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021), the Ninth circuit reversed the district court’s per-account determination and made the per-form cap the law within the 9th Circuit. United States v. Bittner, No. 20-40597 (5th Circuit), was on appeal from a taxpayer friendly decision reducing the $2.7 Million dollar penalty to $50,000 based on a $10,000 per form cap on non-willful FBAR penalties.  Although not guaranteed, it appeared that the momentum was in the taxpayer’s favor for an affirmance of the reduction.  However, the Fifth Circuit reversed the favorable district court decision and held that the “$10,000 penalty cap therefore applies on a per-account, not a per-form basis.” Continue Reading Non-Willful FBAR Penalties Will be Much Higher in the Fifth Circuit

United States Supreme Court Building in Washington DC, USA.The Supreme Court’s recent decision in CIC Services, LLC v. Internal Revenue Service may have significantly expanded taxpayers’ ability to obtain immediate injunctive relief against onerous tax reporting requirement.

The Anti-Injunction Act bars any “suit for the purpose of restraining the assessment or collection of any tax.” Civil penalties are usually considered to be “taxes” for purposes of the Anti-Injunction Act. But in CIC Services, the Supreme Court sustained a suit to enjoin the enforcement of IRS Notice 2016–66 which provides that micro-captive insurance arrangements are “listed transactions” which must be disclosed (regardless of the ultimate validity of the transaction) upon pain of a civil monetary penalty under IRC § 6707A – as well as potential criminal sanctions under § 7203 for the willful failure to make a return or supply information required by law or regulation.  The IRS’ problem in CIC Services was that in issuing Notice 2016-66, it had failed to comply with the Administrative Procedures Act (APA) which requires that a rule with the force and effect of law may be issued only after an opportunity for public notice and comment. No public notice, no enforceable rule, the Court held.  The Anti-Injunction Act did not deprive the courts of jurisdiction. Continue Reading Recent Supreme Court Case Provides Possible Pre-Assessment Judicial Review for Onerous Penalties

Audit Envelope Are You Prepared on white paper an yellow envelope holding by human handsWhen a tax return has been selected for office examination, generally the examination of the return will be conducted at the office of the IRS.  Normally a taxpayer will find an office examination has begun when he or she has received a letter or telephone call from the IRS informing him of such examination and that the IRS wants further records and information. Returns selected for office examination present issues which require some analysis and judgment in addition to verification of records. Continue Reading A Guide to Office Audits with the IRS

Wooden drawer is open.

There is a wealth of information available from the IRS that is not generally made available to the public.  Most of this information can be obtained by asking.  This information includes files the IRS assembles about a taxpayer, and various training manuals used by the IRS to train its employees.  In addition to training given to its employees, the IRS, like most professional organizations, conducts continuing education on an annual basis for its various divisions.  Most of the training manuals and annual training materials are available to the practitioner pursuant to the Freedom of Information Act (FOIA). Continue Reading Obtaining Information from the IRS

Give and Take Compromise text on paper with pencilMany people end up owing the IRS for many reasons and there are various options to resolve your tax debt.  Some of the options include an offer in compromise, installment agreement, or currently non-collectible status.

What is an Offer in Compromise?

An offer is when a taxpayer and the Internal Revenue Service settle a taxpayer’s tax liabilities for less than the full amount owed. Continue Reading Compromising with the IRS